Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work

50 Pages Posted: 15 Jul 2009

See all articles by Chaim Fershtman

Chaim Fershtman

Tel Aviv University - Eitan Berglas School of Economics; Tinbergen Institute

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

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Date Written: June 2009

Abstract

With applied work in mind, we define an equilibrium notion for dynamic games with asymmetric information which does not require a specification for players' beliefs about their opponent types. This enables us to define equilibrium conditions which, at least in principal, are testable and can be computed using a simple reinforcement learning algorithm. We conclude with an example that endogenizes the maintenance decisions for electricity generators in a dynamic game among electric utilities in which the costs states of the generators are private information.

Keywords: Applied Markov Equilibrium, Dynamic Games, Dynamic Oligopoly

JEL Classification: C63, C73, L13

Suggested Citation

Fershtman, Chaim and Pakes, Ariel, Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work (June 2009). CEPR Discussion Paper No. DP7323. Available at SSRN: https://ssrn.com/abstract=1433919

Chaim Fershtman (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Ariel Pakes

National Bureau of Economic Research (NBER) ( email )

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